Tax Attorney Robert E. McKenzie explains IRS processing of delinquent taxes.
When a taxpayer requests an installment agreement for larger tax liabilities or proposes an offer in compromise, the IRS applies allowable expense standards. Total allowable expenses include those expenses that meet the necessary expense test. The necessary expense test is defined as expenses that are necessary to provide for a taxpayer’s and his or her family’s health and welfare and/or production of income. The expenses must be reasonable. The total necessary expenses establish the minimum a taxpayer and family needs to live and serve as the basis for granting installment agreements and offers in compromise.
On March 7, 2012 the Internal Revenue Service announced a major expansion of its “Fresh Start” initiative to help struggling taxpayers by taking steps to provide new penalty relief to the unemployed and making Installment Agreements available to more people.